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Abstract:This paper documents the rise of the Internet as a source of state tax-free
cigarettes and its impact on taxed sales elasticities. Using data
on cigarette tax rates, taxable cigarette sales and individual smoking
rates by state from 1980 to 2005 merged with data on Internet
penetration, this paper documents that there has been a substantial
increase in the sensitivity of taxable cigarette sales to state tax rates
that is correlated with the rise of Internet usage within states. The
estimates imply that the increased sensitivity from cigarette smuggling
over the Internet has lessened the revenue generating potential
of cigarette tax increases significantly, although states are still far
from the revenue-maximizing tax rates. (JEL D12, H25, H31, H71,
L66)

FiveThirtyEight covered the ongoing debate over teacher evaluation, citing two companion papers that appeared together in the September 2014 issue of the American Economic Review. In "Measuring the Impacts of Teachers" I and II the authors construct "value-added" estimates for teachers in a large urban school district by observing how students' test scores change from year to year as they pass through each teacher's classroom. They find that their teacher value-added scores are not significantly biased and are potent predictors of students' later-life outcomes.

Wonkblog covered an article published this month in the American Economic Journal: Applied Economics. In Saving Lives at Birth: The Impact of Home Births on Infant Outcomes the authors study a sample of over 300,000 Dutch women and find that home birth increases the risk of newborn mortality, especially for low-income women, likely because of reduced access to medical technologies after delivery.

A Wall Street Journalanalysis of potential merger activity in the health insurance industry cited a study published in the American Economic Review. In "Paying a Premium on Your Premium? Consolidation in the US Health Insurance Industry," the authors found that a 1999 merger between two large U.S. health insurers drove up customer premiums and depressed doctors' earnings in certain parts of the country.